Survival and the art of profit maximization

We study the relationship between rationality and economic survival in a simple dynamic model, where agents from different populations interact repeatedly through random matching. An explicit criterion (“bankruptcy”) determines whether agents survive each interaction; all agents are presumed to be aware of this criterion. Survival in each interaction depends on two factors: the strategies agents adopt when they interact, and the wealth levels they bring to the game. The model is completely symmetric with the only difference between the agents of different populations being their objectives. We consider the case where there are two populations of agents in which all agents from one group have as their objective, maximizing the expected profits from each interaction, while all agents from the other attempt simply to maximize the probability of surviving (i.e., not going bankrupt in) the interaction. We show that under the equilibrium dynamics, the proportions of each group in the total population must be bounded away from zero, but the balance is in favor of the survival-probability maximizers in that their numbers as a fraction of total population must always exceed 1/2, and can be arbitrarily close to unity. On the other hand, the fraction of total wealth controlled by the expected profit maximizers must also be at least 1/2, and can asymptotically tend to unity.     

Shadow profit maximization and a measure of overall inefficiency

Determining the profit maximizing input–output bundle of a firm requires data on prices. This paper shows how endogenously determined shadow prices can be used in place of actual prices to obtain the optimal input–output bundle where the firm’s shadow profit is maximized. This approach amounts to an application of the Weak Axiom of Profit Maximization (WAPM) formulated by Varian [(1984) The Non-parametric approach to production analysis. Econometrica 52:3 (May) 579–597] based on shadow prices rather than actual prices. At these shadow prices, the shadow profit of a firm is zero. The maximum shadow profit that could have been attained at some other input–output bundle is shown to be a measure of the inefficiency of the firm. Because the benchmark input–output bundle is always an observed bundle from the data, it can be determined without having to solve any elaborate programming problem.

The method of entropy maximization

Use of Boltzmann’sH-function has been widely advocated for the «production», via its maximization under constraints, of prior probability distributions, e.g. in the search for noninformative priors in econometrics. The procedure appears to rest on a misunderstanding of theH-function’s role in statistical mechanics, where it was first introduced by Boltzmann. This paper traces the origin and development of the method and criticizes its inappropriate and misleading applications.     

A two-dimensional problem of revenue maximization

We consider the problem of finding the mechanism that maximizes the revenue of a seller of multiple objects. This problem turns out to be significantly more complex than the case where there is only a single object (which was solved by Myerson, 1981). The analysis is difficult even in the simplest case studied here, where there are two exclusive objects and a single buyer, with valuations uniformly distributed on triangular domains. We show that the optimal mechanisms are piecewise linear with either 2 or 3 pieces, and obtain explicit formulas for most cases of interest.     

The persistence of economic profit

Recently, as practitioners and researchers from developed countries have increasingly probed the activities of emerging economies, what exactly drives the long-term economic profitability of firms in China has become the most salient issue in the above fields. However, a study dedicated to the persistence analysis of profitability differentials among firms in China has not yet been proposed. This study thus employs China’s business database to examine the persistence in the incremental components of the industry and firm effects on economic profitability and tests the hypotheses that conform to the conventional wisdom of relative rates of persistence. A persistence partitioning model is fitted to a new data set, and the results show that the incremental effects of industry on economic profitability persist longer than the incremental effects of the firm. In other words, the long-term competitive advantages of firms in China are more predictable and sustainable based on industry influences compared to firm factors. These findings support the predictions of industrial organization economics, and provide some implications for corporate strategy.     

Property value maximization and public sector efficiency

This paper analyses the efficiency implications of property value maximization. Communities are open, so that utilities are parametric to housing producers and the local government. Each local government chooses its public good output to maximize aggregate property value in the community, ignoring feedback effects on the composition of the housing stock. It is shown that this type of government behavior generates an equilibrium in which all communities are internally Pareto-efficient.     

The directional profit efficiency measure: on why profit inefficiency is either technical or allocative

The directional distance function encompasses Shephard’s input and output distance functions and also allows nonradial projections of the assessed firm onto the frontier of the technology in a preassigned direction. However, the criteria underlying the choice of its associated directional vector are numerous. When market prices are observed and firms have a profit maximizing behavior, it seems natural to choose as the directional vector that projecting inefficient firms towards profit maximizing benchmarks. Based on that choice of directional vector, we introduce the directional profit efficiency measure and show that, in this general setting, profit inefficiency can be categorized as either technical, for firms situated within the interior of the technology, or allocative, for firms lying on the frontier. We implement and illustrate the analytical model by way of Data Envelopment Analysis techniques, and introduce the necessary optimization programs for profit inefficiency measurement.     

Utility maximization under a shortfall risk constraint

The article analyzes optimal portfolio choice of utility maximizing agents in a general continuous-time financial market model under a joint budget and downside risk constraint. The risk constraint is given in terms of a class of convex risk measures. We do not impose any specific assumptions on the price processes of the underlying assets. We analyze under which circumstances the risk constraint is binding. We provide a closed-form solution to the optimization problem in a general semimartingale framework. For a complete market, the wealth maximization problem is equivalent to a dynamic portfolio optimization problem.     

Bureaucratic corruption and profit tax evasion

Firms may evade taxes on profits and can also avoid fulfilling legal restrictions on production activities by bribing bureaucrats. It is shown that the existence of tax evasion does not affect corruption activities at the firm level, while the budgetary repercussions of tax evasion induce less corruption. Policy measures which alter the gains or losses from corruption have a non-systematic impact on tax evasion behaviour.      

Why profit related pay will fail

Here the author discusses the concept of profit related pay and assesses the practical implications of recent measures to promote this method of payment in Britain through tax relief. The new initiative, it is argued, is unsound in concept and design and unlikely to meet stated objectives.     

The R & D profit team

R & D personnel can be full fledged embers of the profit-team when R & D Managements bring them into fact-to-face contact with company goals.     

Political regimes and bank interest margins

The political determinants of banks' profitability are yet to be fully explored in the political economy of finance literature. This article brings politics to the theoretical discussion and the empirical analysis of bank interest margins, arguing that differences in political regimes are crucial in accounting for variations in banking profits across countries. The paper argues that we should expect lower margins from financial intermediation in autocracies than in democracies because of an inherent credibility problem and a lack of oversight in the former. Limited by state-owned banks or regulations favoring cronies, the room for financial elites to develop independent political power to threaten the government should be lower in autocracies than in democracies. I test this hypothesis with nonparametric (matching) and parametric analyses, where the former is used to estimate the latter to lower model dependence. The results consistently show that banks' interest margins in autocracies are lower by some amount between -0.4 and -1.3. This association is also confirmed indirectly when we analyze the impact of banking competition. The existence of big banks in democracies is positively related to banks' profits from intermediation, while the opposite is true for autocracies.     

Safety of nonfederally insured versus federally insured credit unions in the United States

The recent failure of the Rhode Island Share and Deposit Indemnity Corporation has heightened the debate about mandating federal deposit insurance for credit unions. To date, however, opponents of and proponents for required federal deposit insurance for credit unions have relied primarily on anecdotal evidence to support their positions. The objective of this study is to provide empirical evidence concerning differences in the behavior of federally insured versus nonfederally insured credit unions in the United States in 1989. Results suggest that the problems occurring in Rhode Island are not symptomatic of widespread differences in the safety of the two groups of credit unions throughout the country.     

上市公司利润操纵行为及其治理

由于我国上市公司法人治理不完善、股权割裂、法制不健全等原因,上市公司出于市场融资、配合二级市场炒作、避免亏损、管理层骗取激励基金及政治追求等特别目的,人为进行盈余操纵,甚至财务欺诈的行为较为普遍,严重损害了股东及债权人的利益,助长了市场的投机风气,影响到证券市场的稳定和健康发展.就我国上市公司的利润操纵手段及治理措施进行研究,对于提高证券市场会计信息的真实性、准确性和公允性具有极其重要的意义.     

物流成本管理挖掘第三利润源——访中国物流学会副会长、西安交通大学管理学院教授冯耕中

面对全球激烈的市场竞争，人们把探寻利润的目光转向了被誉为第三利润源泉的物流领域。力图通过降低物流成本。增强竞争优势。越来越多的企业对物流成本管理高度重视。然而在我国，由于现行企业会计制度中没有单独考虑到物流成本的问题，物流成本的各个项目分散在企业成本核算的不同会计科目中，所以决策者很难获得准确的企业物流成本数据，而且物流成本往往具有很大的隐蔽性。在这种情形下，企业希望通过压缩物流成本、挖掘第三利润源泉就成为无源之水、无本之木。同时，企业微观物流成本信息的缺位，使得我国宏观物流政策的制定也缺少可靠的数据支撑。     

发掘卡车使用中的利润

“快速、长途、重载”将成为货运行业新的发展方向。运输企业应改变以往单纯从载重和折旧中寻求最大价值的盈利模式，通过提高卡车完好使用率、运输速度和吨位，实现节约成本和盈利的目的。     

“三位一体”模式实现物流边际效益最大化——访乐友集团副总裁江波

1999年10月,乐友公司在北京诞生。2000年1月18日,乐友网正式开通,开启了中国孕婴童B2C电子商务元年。2004年10月,乐友会员目录创刊,首创“网上商城＋连锁店＋直购目录”三位一体模式。     

Measuring scale effects in the allocative profit efficiency

This paper provides an approach to the measurement of the “scale effects” in the allocative profit efficiency. To be specific, we evaluate the improvements of profit that can be accomplished by means of a change in the scale size, once technical efficiency is achieved. New decompositions of the allocative efficiency into a scale effect component and the corresponding residual mix effect component are derived.